Back to School

Despite the weak economy, employer-based tuition-assistance programs appear to be thriving. Some disagreement exists on determining ROI, however, and the amount companies are willing to reimburse employees for their education varies by industry, according to the study.

Thursday, December 1, 2011
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At aerospace-and-defense firm Rockwell Collins, lots of employees attend college on the company's dime.

"We rely on innovation," says Anita Augustine, who oversees the Cedar Rapids, Iowa-based company's corporate university. "We want to retain the best and the brightest, because the types of products we develop can't just be cutting-edge; they've got to be bleeding-edge."

Of the company's 19,000 employees, between 1,500 and 1,700 avail themselves of its tuition-assistance program each year, taking individual courses and obtaining associate's, bachelor's, master's and doctoral degrees at more than 160 different schools, says Augustine.

Rockwell Collins has been steadily adding money to the program in recent years, she says. It is now capped at $7,500 per employee, per year. 

Despite the struggling economy, Rockwell Collins isn't alone. The latest Benefits USA study, from Kansas City, Kan.-based Compdata, found the number of companies that offer tuition reimbursement to all of their employees has grown significantly in the past three years.

While only 35 percent of employers offered tuition reimbursement to all their employees in 2009, 45 percent did so in 2010 and 52 percent offer it this year.

The amount companies are willing to reimburse employees for their education varies by industry, according to the study, which is based on an analysis of 4,500 benefit plans covering approximately 6 million employees in the United States.

Manufacturing and distribution companies appear to be the most generous, with an average per-employee reimbursement maximum of $4,689 per year. Utilities offer their employees an average of $4,227, and companies in banking and finance reimburse employees an average of $3,869 per year.

Employers in the healthcare industry offer $3,104 annually, while those in hospitality offer the lowest average reimbursement maximum, at $2,757.

Experts familiar with tuition-assistance programs say they aren't surprised by the findings.

"The number of calls I get about tuition-assistance programs has remained fairly steady," despite the recession, says Allan Weitzman, head of the labor and employment law practice at Proskauer's Boca Raton, Fla., office. "[Companies] look at it as a way to build morale and instill a sense of loyalty. They also believe that, by having a better-educated workforce, they'll have an edge over their competitors." 

Clients frequently question, however, how to ensure they'll get a good return on their investment, he says.

"I tell them there are no guarantees, but that there are things they can do to make it more likely the program will be a success," says Weitzman.

First, he says, employers should have a minimum-service requirement in place -- between one and three years -- before employees are eligible for tuition reimbursement.

Organizations should also require supervisors to review the requested classes to ensure they correspond in some way to the employee's current or potential future job before funds are approved.

It's also important to ensure employees won't "take the money and run," by leaving shortly after completing a course or receiving a degree the company helped pay for, says Weitzman.

"You can require that anyone who leaves the company within a certain time after being reimbursed will owe the company some or all of that money," he says. "You can pick one, two or five years -- any number you want, with the understanding that if you make it too onerous, you'll scare people off."

Others disagree with that approach.

"Having this 'stick' approach kind of sends a message to your employees that you don't really trust them," says John Zappa, CEO of EdLink, a Chicago-based firm that helps companies manage their tuition-assistance programs.

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Recovering the money could also potentially expose the company to legal challenges that may not be worth the effort, he adds.

In most cases, having minimum-service requirements will make a "stick" approach unnecessary, says Stephen Kramer, president of Watertown, Mass.-based Tuition Advisory Services.

"Extending the time before employees become eligible for this helps you 'manage out' the people who may join your firm with the intent of using your TAP and then leaving," says Kramer, whose firm also helps companies manage their tuition-assistance programs.

"I've seen a lot of companies reconsider their repayment policies in favor of putting more emphasis on eligibility requirements," he says.

At Rockwell Collins, which is a Tuition Advisory Services client, the only employees required to stay on after completing an employer-paid course of study are those who obtain an M.B.A. or Ph.D., says Augustine.

"We require them to sign a contract in which they agree to stay on for two years post-graduation," she says. "If they leave before then, they're required to reimburse us for a pro-rated amount."

Many companies have begun integrating their TAPs with their internal employee-development programs, says Zappa.

"In the past, this was seen as an employee benefit; now, there's much more focus on targeted outcomes -- identifying where skills need to be strengthened, and then using a combination of tuition-assistance and in-house learning to get employees to where they need to be," he says.

AlliedBarton, a Conshohocken, Pa.-based security services firm with offices nationwide, has partnered with DeVry University, the University of Phoenix and other institutions to offer its employees subsidized courses as a means to, among other things, strengthen its leadership pipeline.

"Many of the people who work here, from the CEO on down, worked their way up through the company ranks, and we want to continue growing from within," says Brent O'Bryan, AlliedBarton's vice president for learning and development.

"If we can get our employees started on the road to furthering their education," he says, "they're much more likely to continue and get their degree."

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